Reference no: EM132369804
Discussion Reading
Larson and Grey introduce three people factors that influence the quality of estimates:
1. Expertise: the skill and familiarity of the people making the estimates
2. Risk aversion and probability of success: introducing padding to improve the probability of the estimate proving correct
3. Organization culture: Do organizational expectations focus on accuracy, speed, or something else in the estimate process?
Expertise is largely a question of training, education, and experience. But risk tolerance is a combination of situational and intrinsic factors.
Mark Murphy (Forbes contributor, author, and educator) has done research on motivation, comparing five major motivators that drive people's actions at work: achievement, power, affiliation, security, and adventure.
Murphy found that nearly twice as many people are motivated by security as adventure - seeking continuity, consistency, and predictability in their job work and pay. Many more people are intrinsically motivated by security than are intrinsically motivated by adventure and risk taking.
From a situational perspective, Murphy's research on risk tolerance discovered that top executives like taking risk about twice as much as frontline employees do. Murphy's research supports the conclusion that this is mostly because the cost of failing is usually a lot more expensive for frontline employees than for well-compensated executives (with executives being generally less likely to be fired for making mistakes and having larger financial cushions if they are fired).
Another situational factor is organizational culture. Does the organization prize accuracy? How does the organization respond when outcomes differ from expectations? Google has found that individuals on teams with higher psychological safety are less likely to leave Google, more likely to harness the power of diverse ideas from their teammates, bring in more revenue, and are rated as effective twice as often by executives. What is psychological safety in this instance? It is feeling comfortable taking risks on the team without feeling insecure or embarrassed. In short, they aren't punished for being "wrong."
What does all this mean for estimating costs for projects? Top-Down estimating approaches that rely on the experience and expertise of senior managers are relying on a pool of decision makers with higher risk tolerance than the front-line employees that have to implement those decisions. Organizations that value accuracy but punish mistakes encourage employees to pad estimates.
Pick a discussion thread that is of interest to you or start a new one. The goal of this discussion is to explore ways of thinking about how even quantitative, technical aspects of project execution are linked to sociocultural and cognitive psychology considerations. Unlike traditional engineering problem assignments, there are no right answers here. Challenge yourself and your classmates to think both deeply and broadly about what you would do if you found yourself in this situation.
Source Materials: Mark Murphy, If You Want Your People to be Less Afraid of Taking Risks, Reduce the Cost of Failure, Forbes 8/13/19 and Julia Rozovsky, re:Work - The five keys to a successful Google team, rework.
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